US EIA raises natural gas production outlook

The US Energy Information Administration (EIA) revised higher its outlook for dry natural gas production in 2018 on increased pipeline takeaway capacity and growing demand for LNG exports.

US dry-gas production, which excludes volumes lost during processing and production, should average 81.2 Bcf/d (2.3bn m³/d) this year, up by more than 10pc from 2017 production, the EIA said today in its monthly Short-Term Energy Outlook. That level would set a new US annual record if reached.

Total US natural gas production in 2017 reached a new high, but dry natural gas production at 73.6 Bcf/d last year did not exceed 2015 levels, according to the EIA.

Pipeline capacity is constrained in northeast Pennsylvania, which is located atop the prolific Marcellus and Utica shales. Transcontinental Gas pipeline's 1.7 Bcf/d Atlantic Sunrise expansion project is expected to begin service in mid-2018 and will connect production from Pennsylvania to markets in the US, midcontinent and southeast, easing some of that state's capacity bottleneck. Once that project begins flows, Tennessee Gas pipeline zone 4 prices should narrow their discount to the Henry Hub, the EIA said.

Growing US natural gas production would support increasing LNG exports, which averaged 1.9 Bcf/d in 2017. The US is expected to add 6.05 Bcf/d of new liquefaction capacity by 2021, in addition to 3.5 Bcf/d already in operation at Sabine Pass on the Louisiana-Texas border and at Cove Point in Maryland.

Cove point is ramping up exports. In May the facility exported an estimated 23.5 Bcf, up by 75pc from the prior month, the EIA said.

This year the Elba Island liquefaction project in Georgia is expected to commission the first six of 10 small liquefaction units, or trains, with a combined capacity of 200mn cf/d. New trains at Cameron, Freeport and Corpus Christi — all located on the US Gulf coast — are expected to be commissioned in the next three years.

The EIA revised lower its forecast 2018 Henry Hub price average to $2.99/mmBtu from its prior expectation of $3.01/mmBtu on the expected increase in production rates. The EIA expects that price average to rise to $3.08/mmBtu in 2019.